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baby steps – Dave Ramsey the Israeli way

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legal warning: The information here should not be understood legally as financial advice. If you believe anything on this site is in error, please contact me. I am always open to corrections, new ideas, and new opinions...

Over the past few months, I read (okay listened to an audiobook of) Dave Ramsey’s Total Money Makeover.  He employs a brilliant system for earning and saving money that has truly taught me a lot.  But living in Israel, the financial situation is quite different.  Our financial laws, labors laws, and investments work quite differently form the United States and in order to make it in Israel, one has to think like and Israeli, not an American.

First let me introduce Dave Ramsey’s system.  His system follows 7 baby steps to building wealth.  The idea is to only go to the next step when the previous steps are completed.

Baby Step 1 – Set up an emergency fund of $1000

Baby Step 2 – The debt snowball.  Pay off all your debts from smallest to largest

Baby Step 3 – Bring your emergency fund up to 3-6 months worth of expenses

Baby Step 4 – Invest 15% of your income

Baby Step 5 – Make a college fund for your kids

Baby Step 6 – Pay off your house early

Baby Step 7 – Build wealth and give

While I agree with Dave on many items, I think some have to be changed based on the current volatile financial system and the Israeli market and government.  Below are the list steps I would recommend in Israel.

Baby Step 1 – Set up an emergency fund of 3 months worth of expenses.  We live in dangerous times.  Unemployment is up and jobs are hard to come by.  Unless you’re very secure in your job, be prepared.

Baby Step 2 – The debt snowball.  Pay off all your debts from smallest to largest. – I agree with this step.  Many criticize this step and claim that the debt snowball should be from the largest interest to the smallest and if you have the proper discipline, this is the way to go.  Otherwise, enjoy the small victories of conquering each debt and get to the bottom of the pile.

Baby Step 3 – Bring your emergency fund up to 6 months worth of expenses

Baby Step 4 – Invest more of your income.  You should already be investing in your pension (and keren hishtalmut is applicable) at your work.  Pushing off these items in order to pay a debt would be turning down a 200% return on investment (because of the match from your workplace) in order to pay off a debt that is at its worst 20% – 30%. One should enjoy the investment offered by a working place even before Baby Step 1, but only begin to invest beyond that when one reaches Baby Step 4.  At this point I agree that 15% of income to be invested is an optimal amount.

Baby Step 5 – Children’s Emancipation – Thank God we live in Israel.  College here is much cheaper.  But another major cost can hit you up more faster than college – a wedding.  Put aside the money you need to get your kids out of the house when the time is right.  You don’t have to put aside every last agorah, but enough to help your kids and yourself ensure that a time of blessing does not become a source of distress.

Baby Step 6 – Pay off your mortgage early – I absolutely agree with this one.  If your kids are young enough, I would even recommend switching the placing of this Baby Step with Baby Step 5.

Baby Step 7 – Build wealth and give – This would be a great time to learn the laws of tzedakah.  Share not only your wealth, but also your learning with others.

I hope to, in the coming weeks go through a numbers of tips for making it financially and living in Israel.  If anyone has any tips, ideas or would like to be a guest writer, drop me a line at

Shabbat Shalom


  1. Jo Guy says:

    zedaka is #7? oh jonny…

    • jonnydegani says:

      I don’t mean to not give tzedakah until you reach this point. I mean that once you reach this point tzedakah will be a greater priority. If someone is in debt, he or she should not be donating an extra thousand dollars to the shul. This person should be giving ma’aser (if he or she can afford it), but until one’s own house is in order, one should not be giving extra handouts to others.

      I will admit though that as one goes through the baby step process, tzedakah should increase. Once you’re out of debt, and working on saving for your kids etc, it makes sense to begin to donate more. But for that matter the same goes for vacations. As you’re in debt, expensive vacations are out of the question, but as you get out of debt and work for other financial goals, then vacations, even expensive ones, are much more of a possibility.

  2. Jo Guy says:

    agree with you except for the “if you can afford it” part.
    This is the one place where the Torah says to test G-d and to give even when it is difficult (minimum 10%, max 20% unless you’re Bill Gates…).
    So, zedaka goes to #1, and then increasing your 10% up to 20% #7, that I can swallow 🙂

  3. Greg T says:

    This also brings up the issue of “where” you give your money. Giving your money to a tzedaka that buys apartments for young couples while trying to pay off your mortgage doesn’t seem worthwhile to me. However, giving tzedaka to an organization with low overhead that provides food/clothing/shelter to people who cannot get it otherwise it way different.

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